LEGRAND_REGISTRATION_DOCUMENT_2017

MANAGEMENT REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED DECEMBER 31, 2017

Year-on-year comparison: 2017 and 2016

R 5.3.2.8 OTHER FACTORS AFFECTING THE GROUP’S RESULTS

success, and the costs can be reliably quantified. Once these conditions are satisfied, a portion of the relevant development expense is capitalized. Development costs are amortized from the starting date of the sale of the product on a straight-line basis over the period of its expected benefit, not exceeding a period of ten years. R 5.3.2.6 OTHER OPERATING INCOME AND EXPENSE Other operating income and expenses include restructuring costs and other expenses and provisions. R 5.3.2.7 OPERATING PROFIT Operating profit consists of net sales, less cost of sales, administrative and selling expenses, research and development costs, and other operating expenses.

W The acquisition of Legrand France in 2002 and associated purchase accounting adjustments and transactions related thereto have affected net income. In particular, the significant intangible assets recorded in connection with the acquisition of Legrand France increased the amortization charges of the Group. The purchase accounting adjustments relating to the acquisition of Legrand France essentially concern the revaluation of trademarks that are being amortized on a straight-line basis until 2021 at the latest, and patents, amortized on a declining-balance basis until 2011. W Acquisitions made since 2002 have also had an impact on the Group’s net income. This is because intangible assets revalued as part of the purchase-price allocation of entities acquired generate additional amortization.

5.4 – YEAR-ON-YEAR COMPARISON: 2017 AND 2016

05

12 months ended

December 31, 2017

December 31, 2016

(in € millions)

Net sales

5,520.8

5,018.9

Operating expenses Cost of sales

(2,627.0)

(2,381.0)

Administrative and selling expenses

(1,511.6)

(1,364.7)

Research and development costs

(252.1)

(237.7)

Other operating income (expenses)

(104.5)

(101.5)

Operating profit

1,025.6

934.0

Financial expenses

(92.1)

(101.3)

Financial income

13.7

10.9

Exchange gains (losses)

(8.3)

6.5

Financial profit (loss)

(86.7)

(83.9)

Profit before tax

938.9

850.1

Income tax expense

(224.2)

(218.6)

Share of profits (losses) of equity-accounted entities

(1.5)

(1.3)

Profit for the period

713.2

630.2

Of which: W net profit attributable to the Group

711.2

628.5

W minority interests

(2.0)

(1.7)

145

REGISTRATION DOCUMENT 2017 - LEGRAND